Why the Numbers Aren’t Adding Up for the GOP Tax Bill

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Members of the House Ways and Means Committee were confronted with a gaping revenue hole of at least $74 billion Wednesday, after a change they made to their tax plan on Monday was found to wipe out most of the revenue expected from an excise tax on multinational corporations.

As Republicans break out the abacus to try to get the tax math to work, here are a few of the major challenges they face:

The Budget: The House tax bill originally included a 20 percent excise tax on imports by multinational companies, a measure intended to ensure that companies do not shift profits overseas in response to other changes in the code. The proposed tax raised alarms among multinational businesses and related lobbying groups. Americans for Prosperity, a conservative advocacy organization, compared the proposal to the "misguided" border adjustment tax that was jettisoned by Republicans earlier this year. But an amendment changing the proposed tax erased 95 percent of the $154.5 billion that would have been raised, according to estimates from the congressional Joint Committee on Taxation. That would leave the House GOP tax bill more than $74 billion over the $1.5 trillion cost level they’re targeting to be able to pass a tax overhaul in the Senate without facing a Democratic filibuster. The Senate’s nascent tax bill will not include the excise tax, CNBC’s Ylan Mui reported Wednesday.

One option still being considered to help pay for tax cuts: repealing Obamacare’s individual mandate, which would save about $338 billion over 10 years but also result in millions fewer Americans having health insurance coverage.

The Votes: Democratic victories in Tuesday’s elections arguably added urgency to the GOP’s tax-cutting efforts as members of Congress feel an even greater need to show they can check off at least one major agenda item before voters go back to the polls next year. But the big wins notched by Democrats may also make it harder for Republicans to find the votes they’ll need to push through their tax changes. “If they didn't already have enough anxiety about facing voters in 2018, the House GOP tax bill adds more because its elimination of the state and local income tax deductions will leave many upper-middle-class suburban Republicans with higher — not lower — tax bills,” CNBC’s John Harwood writes.

The Politics: Is this really a tax cut for the middle class? That’s the $5 trillion question, and the answer matters both for changes being made to the tax bill and for efforts to pitch the legislation to the public.

Trump and other Republicans insist the bill is about helping the middle class, and the president reportedly told Democratic senators on a conference call Tuesday that his accountant told him he’d “get killed” under the GOP plan. “The deal is so bad for rich people, I had to throw in the estate tax just to give them something,” Trump said, according to The Washington Post. House Speaker Paul Ryan reportedly said Wednesday that, “even though there's a lot of false information out there, everybody gets a tax cut” under the Republican plan.

That may be the goal, but such claims about the existing plan have been undercut by multiple independent analyses. While Republicans claim that their bill will result in tax relief across all income levels, critics argue that millions of middle-class households will end up paying more. Both claims are true, based on the analyses released by JCT and other independent groups. But if “everybody” actually means “everybody,” the GOP’s current plan doesn’t do it. A corrected analysis released Wednesday by the Tax Policy Center finds that 7 percent of taxpayers will see a tax increase next year, and 25.5 percent will pay more in 2027. The top 1 percent of income earners would get roughly half of the tax benefits under the plan by 2027.

Correction: This article originally misstated the name of the conservative group opposing the excise tax and comparing it to a border adjustment tax. The group is Americans for Prosperity, not Heritage Action.

As editor in chief, Yuval Rosenberg oversees all aspects of The Fiscal Times' website and email newsletter. His writing has appeared in publications including BusinessWeek, CNBC.com, CNNMoney.com, Fast Company, Fortune, Newsweek, Money and Time.